Cement Sector on the Rise: Strong Volume Growth and Price Hikes Boost Profits
The Indian cement industry is witnessing a resurgence, driven by robust volume growth, stable demand, and recent price hikes. Analysts predict a significant improvement in profitability, particularly in the second half of FY25.
Cement IndustryVolume GrowthPrice HikeReal EstateProfitabilityReal Estate MumbaiFeb 11, 2025
According to a report by InCred Equities, profitability in the sector is expected to rise further.
Another report by Motilal Oswal Financial Services Ltd (MOFSL) indicates that the cement industry is poised for a robust recovery in the second half of FY25, driven by pent-up demand, increased government capex, and sustained momentum in the real estate and housing sectors.
JM Financial projects that cement demand will remain strong in the coming years, with a compound annual growth rate (CAGR) of 7-8 per cent over FY25E-27E.
Despite a brief slowdown anticipated in FY25, the sector is expected to witness strong growth, driven by positive demand fundamentals and structural changes within the industry.
InCred Equities noted that the industry experienced a YoY growth of approximately 6-7 per cent in Q3FY25, based on their analysis of top listed companies, where their coverage universe grew by more than 9 per cent YoY.
Leading companies like Ultratech Cement and Ambuja Cements (consolidated) outperformed the industry with double-digit growth and gained market share.
Shree Cement's strategic focus on profitable volume led to a slight decline of around 1 per cent, while Dalmia Bharat's volume fell 1.5 per cent YoY due to the discontinuation of JPA assets tolling arrangements.
However, this benefited JK Cement, which saw increased volume in central India.
Management commentaries highlighted an improvement in overall demand in Q3, as evidenced by early trends from government spending in some regions.
Most players expect cement demand to grow by 6-7 per cent in Q4FY25 and maintain similar growth in FY26.
The average realization improved on a QoQ basis by around 1 per cent in Q3FY25, for the first time since Q3FY24, with prices showing improvement across regions except South India.
Dalmia Bharat posted the highest QoQ improvement in blended realization of approximately 3 per cent, followed by Ultratech Cement and JK Cement with 1.6% and 1.4% respectively.
Companies remain optimistic about pricing, citing strong demand expected in Q4FY25.
As of December 2024, Yes Securities reported that all-India average cement prices stood at Rs 366 per 50 kg bag, an increase of Rs 8 from November 2024.
The central region experienced the highest price hike of Rs 11 per bag, followed by the south, north, and east regions at Rs 8 per bag, while the western region saw the least increase of Rs 5 per bag.
Since December, cement dealers have initiated incremental price hikes, driven by increased demand from the real estate sector, better labour availability post festive season, and an increase in orders from the infrastructure sector due to government initiatives.
InCred Equities believes that profitability, which bottomed out in the previous quarter, has started to improve and is expected to continue on this path, driven by the current fuel cost environment, improving efficiency in cost savings, and the likely uptick in cement prices and demand.
The brokerage firm expects Q4FY25 to be better, with government-targeted capex reviving and becoming visible in December 2024.
They maintain an Overweight stance on the sector, with Ultratech Cement and Ambuja Cements as their top stock picks.
Leading players like Ultratech Cement, Adani Cements (ACC + Ambuja Cements) remain positive about cement demand in India and expect the industry to grow by an average of 7-9 per cent in Q4FY25, confident of outperforming the industry growth rate.
Other players like JK Cement, JK Lakshmi Cement, and Birla Corporation are expected to grow in line with the industry in H2FY25.
Frequently Asked Questions
What is driving the revival of the Indian cement industry?
The revival is driven by robust volume growth, stable demand, recent price hikes, pent-up demand, and increased government capex in infrastructure and real estate sectors.
What is the projected growth rate of cement demand over FY25E-27E?
JM Financial projects a compound annual growth rate (CAGR) of 7-8 per cent for cement demand over FY25E-27E.
Which companies outperformed the industry in Q3FY25?
Ultratech Cement and Ambuja Cements (consolidated) outperformed the industry with double-digit growth and gained market share.
How much did all-India average cement prices increase in December 2024?
As of December 2024, all-India average cement prices increased by Rs 8 per 50 kg bag from November 2024.
What is the outlook for Q4FY25 and beyond?
The outlook for Q4FY25 is positive, with expectations of 6-7 per cent demand growth. This trend is expected to continue into FY26, driven by continued government spending and strong demand fundamentals.
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